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Van Eck Mutual Funds
11/20/14: Barron's speaks with Joe Foster about gold and gold stocks. "Evaluating gold stocks," says Joe, "is less about valuation metrics and more about the company’s ability to grow and develop mining properties."
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06/11/14: The Gold Report interviews Joe Foster on the prospects for gold in the second half of 2014. According to Foster, the outlook for gold may be positive in light of the potential loosening of import and tax restrictions in India and stabilization in ETFs. “I think the market is in the process of finding a bottom. Gold will probably struggle through the summer, but I think $1,200/oz. should prove to be a solid floor under the gold price,” says Foster. View article »
04/21/14: Kitco News consults Joe Foster on his outlook for gold. “I see gold in the process of forming a base this year,” he says and details demand from China and production cutbacks as his primary evidence. “So there are fundamental reasons for believing that we are forming a floor here.”View article »
04/14/14: Slowing economic growth in China is working with constrained credit markets to dampen demand for gold in China. Joe Foster maintains that could change “if property values there drop sharply or if the financial system shows more signs of stress.” He adds that, “Chinese citizens have a limited range of investment options…and they have a cultural affinity toward gold.”View article »
06/03/13: Barron’s profiles Van Eck Global’s gold expert, Joe Foster, in a thoughtful piece that highlights Foster’s unique experience as a geologist in the mining industry before he joined Van Eck. Foster shares some of the insights he uses to manage the Van Eck International Investors Gold fund (INIVX). “To distinguish between the mother lode and fool’s gold, Foster studies drill reports to make his own estimates for the volume and quantity likely to come out of a mine.“ View article »
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By: Joe Foster, Portfolio Manager
Continued resilience of gold market in December ends volatile 2014
The recent list of gold detractors was at work again in December:
the U.S. Dollar Index (DXY) advanced to new highs for the sixth
month in a row; the crash in crude oil prices that began in October
continued unabated; the S&P 500® Index reached another record
high; and gold bullion exchange-traded products had their fourth
straight month of net redemptions. Despite all of that, gold
continued to show remarkable resilience, holding around the
$1,200 per ounce level. It ended the year at $1,184.86 per ounce
for a December gain of $17.45 (1.5%).
In our opinion, it was certainly an odd year for the gold market.
There was a stark contrast in the drivers of performance between
the first eight months and the final four months. Positive momentum
had developed for the year through August, driven mainly by
geopolitical risk that culminated with the Russian annexation of
Crimea and the advances of the Islamic State in Syria and Iraq. Gold
gained 6.8% through August, while gold stocks were also having a
stellar year, shown by the 26.8% and 36.4% gains in the GDMNTR
and MVGDXJTR, respectively.
All of this positive momentum has unraveled since August. The
markets began to focus on macro-economic drivers beginning in
early September when the European Central Bank (ECB) announced
a surprise cut in interest rates. This, combined with similar
monetary policy developments from the Bank of Japan (BOJ),
economic weakness in emerging markets, and economic strength in
the U.S. has caused the U.S. dollar to soar. Additionally,
the collapse of crude oil prices has created negative
pressure on commodity prices in general.
While gold finished down in U.S. dollar terms, in most currencies
around the globe gold provided handsome gains in 2014. Some of
the better performers include Mexico, Japan, Brazil, and the Euro
block, all of which saw double digit gold returns in the 10% to 12%
range in local currencies. Russia was the star, where gold gained
74% for the year in Ruble terms.
Except for a sluggish housing market, economic reports issued in December showed the U.S. economy in overall good shape. Payrolls, manufacturing, auto sales, retail sales, and consumer sentiment all came in above expectations. The Federal Reserve Bank (the “Fed”) reports that household debt as a percentage of disposable income is at levels last seen in 2003. Third quarter gross domestic product (GDP) was revised higher to 5.0%. The parabolic rise the U.S. dollar has experienced since September looks set to continue, inflation is nowhere in sight, and the stock market is strong. We believe it is hard to argue with anything but a rosy outlook for the U.S. economy.
This is not a good macro-economic environment for gold. In order to see lasting strength in the gold price, typically investors must sense problems with the U.S. economy or fundamental cracks in the U.S. financial system. Without these, are there any opportunities for gold investors?
In my opinion, gold should be used mainly as a portfolio diversifier and hedge against tail risk. We think of gold as a form of portfolio insurance. Secondly, the rosy outlook expressed earlier is not new. Elements of it were a factor when gold first collapsed in April 2013. Much of this outlook may already be in the gold price. Finally, we believe there are a number of risks that might keep this rosy scenario from happening.
While the consensus is calling for Fed rate increases in 2015, since the 2008 credit crisis the Fed has always found a reason to postpone the increase. There are some interesting parallels between the current global economy and that of the 1997 — 1998 Asian financial crisis. Both periods share weak economies in Asia and Russia, falling commodities prices, and a robust U.S. economy. The late ‘90s saw the tech revolution, while today we are experiencing a revolution in energy through unconventional drilling technology. Despite the strong U.S. economy and benefits of technology, the Fed chose to cut rates in late 1998 in response to the weak global economy and a sharp drop in U.S. stocks. This helped propel a bubble in tech stocks that collapsed catastrophically less than two years later. It will be interesting to see whether international events again influence the Fed to pursue accommodative policies in 2015, as it did in 1998.
Read full December Commentary »
Portfolio Manager, Senior Gold Strategist
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"[Companies] such as Barrick, Newmont, and AngloGold went through a period of conglomeration when large companies were merged together to create what we call "super-majors” and it's very hard to sustain the super major model."
"We've seen subdued M&A activity over the last several years due to the recent bear market in gold. This year, however, there has been a significant pickup."
Joe Foster and Ima Casanova
Gold Investment Team
"We invest across the spectrum, but in Burkina, it is mostly mid-tier and junior companies that are active. Most of Burkina’s gold deposits are moderate to smaller-sized, so we find smaller companies there. Because of the favorable operating environment, there are quite a few interesting opportunities."
"Emerging markets geopolitical risks have probably been the main driver of gold this year. People are worried about financial stability with headlines coming from Thailand, Venezuela, Ukraine, and Turkey. People are also concerned about the growth in China and the Chinese banking system."
Joe Foster and Ima Casanova
Gold Investment Team
"The market focused more on cost and operating results, and did not necessarily punish companies that missed earnings expectations"
"There have been some exciting discoveries, some great drill results, come out of the Dominican Republic."
"Greece is taking a second look at mining and we are seeing some of it gold properties being developed. They have created a fast-track program for new businesses..."
As far back as 1500 BC, Egyptians and other ancient peoples used gold for currency, and its importance has not waned since. In today’s world, we may not carry gold coins in our pockets, but gold remains one of the most highly valued commodities for cultures across the globe.Sound CurrencyGold’s historic role as a sound currency alternative is recognized universally — from farmers in India whose high-carat jewelry is a form of savings, to investors in the West who accumulate coins and bars, to central bankers around the globe who hold gold in their foreign exchange reserves.Powerful Investment ToolToday, gold is recognized as a potentially powerful tool in an investment portfolio. Gold may:
Unless otherwise stated, portfolio facts and statistics are shown for Class A shares; other classes may have different characteristics.
†NAV: Unless you are eligible for a waiver, the public offering price you pay when you buy Class A shares of the Fund is the Net Asset Value (NAV) of the shares plus an initial sales charge. The initial sales charge varies depending upon the size of your purchase. No sales charge is imposed where Class A or Class C shares are issued to you pursuant to the automatic investment of income dividends or capital gains distributions. It is the responsibility of the financial intermediary to ensure that the investor obtains the proper “breakpoint” discount. Class C, Class I and Class Y do not have an initial sales charge; however, Class C does charge a contingent deferred redemption charge. See the prospectus and summary prospectus for more information.
1Van Eck Associates Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to the extent necessary to prevent the operating expenses of the Fund (excluding acquired fund fees and expenses, interest expense, trading expenses, dividends and interest payments on securities sold short, taxes and extraordinary expenses) from exceeding 1.45% for Class A, 2.20% for Class C, 1.00% for Class I, and 1.10% for Class Y of the Fund’s average daily net assets per year until May 1, 2015. During such time, the expense limitation is expected to continue until the Board of Trustees acts to discontinue all or a portion of such expense limitation.
Van Eck Associates Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to the extent necessary to prevent
the operating expenses of the Fund (excluding acquired fund fees and expenses, interest expense, trading expenses, dividends and
interest payments on securities sold short, taxes and extraordinary expenses) from exceeding 1.45% for Class A, 2.20% for Class C,
1.00% for Class I, and 1.10% for Class Y of the Fund’s average daily net assets per year until May 1, 2015. During such time, the
expense limitation is expected to continue until the Board of Trustees acts to discontinue all or a portion of such expense limitation.
2The NYSE Arca Gold Miners Index (GDM) is a modified market capitalization-weighted index comprised of publicly traded companies involved primarily in mining for gold. The S&P® 500 Index, calculated with dividends reinvested, consists of 500 leading companies in leading industries of the U.S. economy. The U.S. Dollar Index (DXY) indicates the general international value of the U.S. dollar. The DXY does this by averaging the exchange rates between the U.S. dollar and six major world currencies. All indices are unmanaged and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index’s performance is not illustrative of the Fund’s performance. Indices are not securities in which investments can be made.
The views and opinions expressed are those of Van Eck Global. Fund manager commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. Any discussion of specific securities mentioned in the commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary.
You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. The Fund is subject to the risks associated with concentrating its assets in the gold industry, which can be significantly affected by international economic, monetary and political developments. The Fund’s overall portfolio may decline in value due to developments specific to the gold industry. The Fund’s investments in foreign securities involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, including the takeover of property without adequate compensation or imposition of prohibitive taxation. The Fund is subject to risks associated with investments in debt securities, derivatives, commodity-linked instruments, illiquid securities, asset-backed securities, CMOs and small- or mid-cap companies. The Fund is also subject to inflation risk, short-sales risk, market risk, non-diversification risk and leverage risk. Please see the prospectus and summary prospectus for information on these as well as other risk considerations.
Investing involves risk, including possible loss of principal. An investor should consider investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus and summary prospectus contain this and other information. Please read them carefully before investing.
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